Under contract for a 1920 multi family

[Michael Junior]

Hey I’m currently under contract for a 3 family built in 1921 and a 4 family built around the same time. Side by side buildings sharing a lot.

Anyways my question is.. would you feel comfortable buying properties this old?? They are both maintained very well. Inspection reports came back with minor details that need to be addressed. I’m just concerned over the long run they may be a pain in the butt to keep up. Both are off market deals, well below any on market comps. Being sold fully occupied , rents below market as well. Any feed back would be great thank you !!

[Jim D.]

Whether I would feel comfortable may depend on exactly how well-maintained, or better yet upgraded, they are.  I had a 1920's multi-family rental property and 1920's single-family as well.  In my case, they appeared well-maintained, i.e. everything seemed in great working order just walking around the house, observing, and testing faucets, stove, etc.  The inspection reports were also pretty solid.  

But they both lacked critical upgrades, and at the time early in my investing career, I was more naive and dismissed some if these considerations.  For example, they had galvanized steel pipes; over the years I was always replacing old plumbing, piece by piece, and it cost a fortune.  In retrospect, it would've made more sense to do a major plumbing upgrade all at once.  Another example, the kitchen in the single-family actually appeared quite nice with a couple sensible upgrades on the surface, but electrical was not.  We later found that the kitchen outlet where it would be common to plug in a toaster, coffee maker, etc was on the same circuit as the upstairs bathroom (only found after tenants kept complaining about tripping breakers).  Finally, both had slate roofing - which I actually think is beautiful and can be quite durable...but on the multi-family, I had a problem with insurance (can tell you more about that privately if you have slate roof, and also, there are fewer qualified roofers that work on slate).

In short, it sounds like you are pretty far into this deal so I don't intend to scare you - in fact, I like old houses and would buy again as investment, just with more caution.  Instead, if I assume (?) this is in CT and I assume there is a basement, I would go crawl around, look at the age of the pipes, electrical, and all that "infrastructure-type" stuff that may pass an inspection because the water pressure is ok, but is only a matter of time before updating is needed.  Or, if things are a bit dated but you feel it is still a good deal with good cash flow, you could certainly account for higher reserves and make sure the numbers still make sense.  Perhaps you could even add some equity by being the owner that makes the updates - I would say my "old" multi-family, despite a few headaches along the way, was in much better shape when I sold it and that was reflected in my sales price.